Chapter Preview. Regression analysis is a statistical method that is widely used in many fields of study, with actuarial science being no exception. This chapter provides an introduction to the role of the normal distribution in regression, the use of logarithmic transformations in specifying regression relationships, and the sampling basis that is critical for inferring regression results to broad populations of interest.

What Is Regression Analysis?

Statistics is about data. As a discipline, it is about the collection, summarization, and analysis of data to make statements about the real world. When analysts collect data, they are really collecting information that is quantified, that is, transformed to a numerical scale. There are easy, well-understood rules for reducing the data, through either numerical or graphical summary measures. These summary measures can then be linked to a theoretical representation, or model, of the data. With a model that is calibrated by data, statements about the world can be made.

Statistical methods have had a major impact on several fields of study:

• In the area of data collection, the careful design of sample surveys is crucial to market research groups and to the auditing procedures of accounting firms.

• Experimental design is a subdiscipline devoted to data collection. The focus of experimental design is on constructing methods of data collection that will extract information in the most efficient way possible.

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